This invention relates generally to a method and system for facilitating buying and selling denominated in multiple currencies. In particular, the present invention relates to a computerized marketplace and method for facilitating the determination of a best bid or best offer in a multi-currency setting.
It is known to have a single-currency marketplace to buy or sell a given asset. One or more participants post prices at which the participants are willing to buy the asset (bid) and other participants post a price at which they are willing to sell the asset (an offer, or “ask”).
At a given point in time, there is a best bid, defined as the highest price posted to buy. There is also a best offer, which is the lowest price posted to sell.
If the best bid and the best offer overlap, such that the best bid is equal to or higher than the best offer, a trade can happen between two participants associated with the overlapping prices posted.
Also, if an interested buyer comes into the market, the interested buyer can immediately look at offer prices and decide to buy from a participant with a best offer. Similarly, an interested seller can sell to a participant with a best bid. Immediate sales are accomplished with a “market order”, which signifies that the buyer or seller does not explicitly post a bid or an offer themselves, they instead respond to the market and trade immediately at a best price available.
If a new participant enters the market and wants to become the best bid, the new participant can look at existing bids and make a bid slightly above a current best bid.
A buying and selling process becomes more complicated when participants in a market are not all using a same currency. Complication can occur due to participants having to pay a fee, such as a foreign exchange (FX) fee, when exchanging currency. Therefore, a trader, denominated in a currency A, may seek to buy an asset. Two offers may be available for the asset in the market: one offer is to sell the asset for 1 unit of currency A, and another offer to sell the asset for 1 unit of currency B. A mid-market currency exchange rate may be 1 A for 1 B, but there may also be a 1% fee associated with converting the currencies involved.
Therefore, the participant could buy the asset for 1A, or he could convert some A into B and buy the asset for 1B. As a result of the FX fee, he would have to spend 1.01A to obtain the 1B. This means that, for him, the offer of 1A is the best offer, even though the two offers are equivalent at mid-market exchange rates. A different participant, denominated in a currency B, may ascertain the same two offers, and yet because the different participant would have to pay a fee to exchange her B into A, may conclude that the B-denominated offer is the best offer.
However, determining a best price from prices presented in multiple currencies can leave room for mistakes, particularly if buying and selling is being transacted at a frenetic pace often present on an online exchange.
Similarly, a participant who wants to become a best bid have a complicated task. For someone viewing the market in a given currency, bids are ordered in given way, and a participant can change a bid to ensure that they show as the best bid. However, once they show their price, it may not be the best bid for another participant viewing the market denominated in a different currency, since the ordering of the bids can change based upon exchange fees.
Therefore what is needed is a marketplace that presents bids and offers according to a particular currency selected by each participant.